The ongoing debate on the growth rate of current fiscal year is a part of regular policy debate in the country. The Bangladesh Bureau of Statistics (BBS) released primary estimation of growth in the first week of April. This sparked the debate, as it usually happens every year.
According BBS, country's gross domestic product (GDP) registered 7.05 per cent growth in FY16. The rate was 6.55 per cent in the last fiscal year, FY15.
Policymakers and some others express their exuberance over achieving 7.0 per cent growth rate - a 'dream growth rate'.
At the same time, many economists and experts expressed their doubt on the achievement. They are not necessarily questioning the ability of Bangladesh to achieve 7-plus annual economic growth; they are rather questioning the soundness of the method of growth calculation and distribution.
NUMBER TALKS: All the international agencies projected the growth rate below 7.0 per cent for the current fiscal year. The World Bank projected 6.30 per cent growth, the International Monetary Fund (IMF) 6.60 per cent, Asian Development Bank (ADB) 6.40 per cent and United Nations Economic and Social Commission for Asia and Pacific (UNESCAP) 6.80 per cent.
Thus, both WB and ADB projected even lower rate than that of FY15 when the country's economy grew by 6.55 per cent.
These agencies, especially The World Bank, raised some questions on the credibility of the number. The international financial institution pointed out that the rate foes not fully match with development of major economic indicators like export earnings, revenue collections and industrial output.
Some drawbacks in estimating or calculating some of the major indicators are quite visible. For instance, the BBS released growth rate of economy even before releasing half-yearly or six-monthly statistics of the quantum index of industrial production (QIIP). However, the seven-month statistics of the QIIP is available now.
Thus the BBS has to heavily rely on presumptions for development of second half of economic activities, including industrial output. While, the presumption for the last quarter is a regular exercise, it becomes weak if the time length become long like five or six months.
At the same time, the BBS has also to use real data for maximum seven months of major economic activities this year. In a few cases it was eight months as the national income data was released quite early - during the first week of April. Usually, estimation of GDP statistics is released during the month of May every year.
This year, there was an unnecessary hurry to release the estimated figure of GDP.
The growth target for the current fiscal year was set at 7.00 per cent, as mentioned in the budget speech of the finance minister. The seventh five-year plan (7FYP) also projected 7.0 per cent GDP growth for FY16.
7FYP projected 23.7 per cent private investment as the ratio of GDP for the current fiscal year.
BBS estimation, however, shows that ratio declined to 21.78 per cent in FY16 from 22.07 per cent in FY15. Again, 7FYP projects 6.4 per cent public investment as the ratio of GDP while BBS estimation puts it at 7.60 per cent.
According to 7FYP, investment-GDP ratio should be 30 per cent to achieve 7.0 per cent growth. Thus incremental capital-output ratio (ICOR) should come down to 4.30 from the existing 4.41. Latest BBS estimation turned the ICOR at 4.16 for current fiscal year as investment-GDP ratio stood at 29.38 per cent.
As ICOR generally refers to the additional capital needed to generate additional output, lower the ICOR, the better it is. Moreover, ICOR reflects how efficiently capital is being used to generate additional output.
Thus, current fiscal year's estimated ICOR indicates that the country's investment efficiency has improved. This proposition required some validity test.
QUALITY QUESTIONED: Going beyond the technical or accounting analysis of growth, a more important question has already emerged. The question is: who is benefiting from the 7.0 per cent or higher growth?
As BBS statistics shows, the government expenditure or public investment contributed more in growth this year than the previous years. But, the quality of public expenditure is under question due to irregularities and misappropriation of funds.
A good number of big and mega projects are now under implementation and more will be included in the list. Huge spending on these projects, especially infrastructure, is definitely contributing to growth. The real benefit can be measured after full implementation and operation of these projects.
Nevertheless, in many cases the spending spree goes beyond rational limits and appears unchecked. Moreover, huge spending is not targeted for utility maximisation or optimisation but scattered benefits in some cases.
As a result, a large part of the population is actually not getting the benefit of spending while a limited section of people extracting additional resources. In this way, socio-economic inequality is rising.
For instance, the government is constructing a number of flyovers in the capital city. But there is little attention to improve the public transport for smooth commuting of over five million daily commuters in Dhaka.
Majority of the commuters have to depend on ramshackle buses, CNG-driven auto-rickshaws, rickshaws and some other types of vehicles. The unbearable traffic congestion is taking a heavy toll on them.
The fruit of growth is not reaching them. Again, the railway is still ignored apparently to give leverage on road-oriented transports. But the reckless driving of poorly trained bus drivers put the lives of millions of people at stake.
In fact, an incremental obsession of growth is actually enhancing socio-economic disparity and ignoring decent jobs. Some may feel comfortable with 4.3 per cent unemployment rate although such lower rate fails to conceal the miserable life of maximum workers and labourers.
Driven by market-oriented neo-liberal philosophy, achieving higher growth becomes the ultimate goal of current development spending. Such spending spree results in compromising the quality of growth, inclusiveness and balanced distribution of growth.
© 2020 - All Rights with The Financial Express